The U.S. government has announced a recalibrated tariff approach for the automotive sector, introducing a more streamlined structure that aims to support domestic vehicle production while aligning with broader trade priorities.
Under the revised policy, vehicles and auto parts subject to the 25% Section 232 tariff will no longer face additional levies tied to steel, aluminum, or certain North American goods, easing the cumulative impact of multiple import duties. However, tariffs on select imports, including those from China, and the standard 2.5% Most Favored Nation (MFN) rate will remain.
In a parallel move, the administration has introduced a credit mechanism to enhance production incentives. Automakers assembling vehicles in the U.S. between April 3, 2025, and April 30, 2026, will be eligible for a 3.75% credit based on the Manufacturer’s Suggested Retail Price. This credit can be used for duty-free parts imports—excluding those sourced from China. For instance, a $50,000 U.S.-assembled vehicle would allow $1,875 worth of qualifying parts to enter duty-free. The credit will decline to 2.5% in the following year before being phased out by April 2027.
This targeted tariff shift reflects an evolving trade framework that places greater emphasis on supply chain alignment and local production capacity. Vehicles assembled in Canada and Mexico are not eligible for the credit, reinforcing the focus on U.S.-based operations.
The policy is expected to encourage expanded manufacturing capacity and new investments across the automotive supply chain, positioning U.S. manufacturers for greater stability and efficiency in a competitive global market.
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